D.C. Current

Why Defense Stocks Could Go Higher

Defense stocks are near all-time highs, even as budget cuts loom. Why investor optimism is not misplaced.

Defense stocks have been on a tear in spite of dire warnings from the industry, the military, and their congressional allies that the nearly $1 trillion in cuts over 10 years demanded by the 2011 Budget Control Act could hobble our military might. The iShares U.S. Aerospace & Defense exchange-traded fund (ticker: ITA) owns companies ranging from giants like United Technologies (UTX) and Boeing (BA) to tiny like Astronics (ATRO) and Engility Holdings (EGL). Over the past 12 months, the ETF is up 50%, to $98—nearly double the...